The collapse in oil prices – almost 60 percent since June – is accompanied by falling in the demand for OPEC oil to its lowest in a decade. In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for the group’s oil would drop to 28.8 million barrels per day (bpd) in 2015, which is nearly 1 million bpd less than it is currently producing.
“The steep drop in global oil prices could endanger the marginal barrel’s output from unconventional sources,” OPEC said in the report, written by its economists at the group’s Vienna headquarters. Drilling activities is expected to retreat back due to high costs while oil prices are unable to cover such costs
Within OPEC’s, top exporter Saudi Arabia urged fellow members to combat the growth in supply from competing sources including U.S. shale, which needs relatively high prices to be economic and has been eroding OPEC’s market share. United States is still by far the largest contributor to non-OPEC supply expansion.
In the report, OPEC forecast total U.S. oil supply will average 13.8 million bpd in 2015, up 950,000 bpd from 2014. The U.S. government expects domestic oil output in 2016 to grow by only 2.2 percent, the slowest pace in years.
Even so, this year’s average demand for OPEC crude is expected to be the lowest since 28.15 million bpd in 2004.
The lower OPEC demand forecast for 2015, plus a rise in OPEC output led by Iraq, means a larger global supply surplus in 2015, without output cuts by OPEC or other producers.